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Airline Industry

Premium air-travel slump gathers pace as trade slows  Jan 19, 2009

Premium air travel slumped further in November as global trade slowed and business confidence waned, adding to carrier woes, the International Air Transport Association said.

The number of passengers with first- and business-class tickets fell 11.5 percent in November compared with a year earlier, IATA said today in an e-mailed statement. Declines were led by a 17.7 percent drop in travel across the Pacific, with trans-Atlantic trips declining 9 percent. The plunge was the sixth in a row and exceeded October’s decline of 6.9 percent.

Evaporating premium travel, the most lucrative source of revenue for airlines, compounds a drop in sales of economy tickets prompted by consumers cutting back amid a deepening global recession. Business confidence in Japan collapsed in December following a record drop in exports. French manufacturing confidence slid to a 21-year low that month, and U.K. unemployment rose at the fastest pace since 1991 in November.

“Business and other premium travel has fallen particularly sharply since the financial turmoil began in September last year,” IATA said. “The extent of this decline reflects the severity of recession.”

Airline revenue from premium ticket sales is now falling faster than passenger numbers, as the average yield on the fares declines, the trade body said. IATA estimates that yields tumbled by more than 12 percent in November.

Fare Sales

Virgin Atlantic Airways Ltd., the long-haul carrier controlled by billionaire Richard Branson, cut fares on “Upper Class” seats this month in an attempt to lure passengers. British Airways Plc, which reported that premium traffic fell by 12 percent in December, is also slashing prices for premium leisure tickets.

“There isn’t a great deal that airlines can do,” said Douglas McNeill, an analyst at Blue Oar Securities in London. “It’s simply a question of enduring the slump as best one can.”

The global airline industry will lose as much $2.5 billion this year as traffic declines, with carriers in the Asia-Pacific region accounting for almost half of the deficit, IATA said Dec. 9. Freight traffic plunged almost 14 percent in November, the sixth consecutive monthly decrease, according to IATA.

“The low point for air travel has not yet been reached since the economic environment is still deteriorating,” the trade organization said. “With yields now falling, this is adding up to be the most difficult revenue environment the industry has faced.”

Premium air-travel slump gathers pace as trade slows
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